Former Broadmoor patient Harry Street, who was released from indefinite detention in the mid-1990s, was caught with the makeshift bomb at his home last year.
More than 50 home-made bullets, two pistols and a revolver were also discovered at the 70-year-old gun fanatic's mid-terrace house in Birmingham.
Street, originally called Barry Williams, was detained under mental health laws in 1979 for the manslaughter of three neighbours in West Bromwich's Andrew Road and a couple who ran a filling station in Warwickshire.
The pensioner, of Hazelville Road, Hall Green, had been due to stand trial at Birmingham Crown Court accused of making an improvised explosive device and possessing two pistols and a revolver with intent to endanger life.
But Street changed his plea and admitted possessing the explosive device, while the Crown accepted his not guilty pleas to four other charges.
The multiple killer had already pleaded guilty at previous hearings to three charges of possessing a prohibited firearm and a count of putting a neighbour in fear of violence between 2009 and 2013.
Street's trial was due to hear evidence from his neighbours in Hall Green, as well as two survivors of his 1978 shooting spree.
In submissions to the court last week, which could not previously be reported, prosecutor Michael Duck QC said the decision not to proceed with four of the charges had been taken after consultation with witnesses.
Crown lawyers had also taken into account the "overwhelming likelihood" that Street will again be detained indefinitely in a secure hospital, Mr Duck added.
The prosecutor told the court: "I have taken the opportunity to speak to a number of witnesses who are particularly relevant to the decision-making process in this case.
"I also spoke yesterday to the officers in the case and the chief Crown prosecutor for this area of the country.
"The Crown takes the view that the interests of the protection of the public are adequately served by acceptance of the (four not guilty) pleas.
"It is quite apparent and would have been the Crown's case, that this man commits offences of the utmost seriousness when he is mentally unwell.
"The overwhelming balance of medical opinion is that this is a significant problem that will take a very significant time to resolve, if it ever does."
Street, who is being treated at the high-security Ashworth Hospital on Merseyside, pleaded guilty today to making the device between January and October last year.
He had earlier admitted throwing items at neighbour Warren Smith's roof, banging on and drilling into walls late at night, making threats towards him and driving past his new address after he had moved out.